Multifamily housing trends property managers should know about in 2018

The multifamily housing sector has been performing very well over the last few years and 2017 was another solid year. Even though rent gains slowed amid robust development, and tenancy levels began to even out in some major cities it still shaped up to be a good year for the industry.

Development will play an important role in the U.S. multifamily market in 2018 according to CBRE Econometric Advisors and the 62 markets tracked by them. It's expected that developers in the U.S. will register the second-highest annual completions count of this cycle, with as many as 258,000 units being completed.

So what does 2018 have in store for multifamily housing and what trends will set the tone for the new year?

The year of amenities

Having a plethora of amenities is quite normal these days in multifamily housing developments. Amenities such as swimming pools, gyms, day care’s and even spas are starting to become common place. However, due to the plateauing of home and rental prices in key markets such as New York and California, developers and property managers need to provide something extra to attract new residents and retain current ones.

Many developers are recognizing the importance of amenities in such a competitive market and are adapting their properties accordingly. They’re also taking into account the new breed of renters (millennials) who are looking for the social and tech aspect that’s been missing from a majority living spaces. They are looking for spaces that accommodates their lifestyle and tastes.

In metro city properties that offer bike storage and maintenance facilities are in greater demand than ever before. The same demand applies to properties that have adopted sustainable and enviornmental practices.

Real Estate Veteran Michael Massie from The Picerne Group stated “The common complaint about amenities is that they’re like your grandmother’s living room: they’re nice to look at, but nobody ever uses them, we prefer to install amenities that people actually use.”

Service based amenities are also starting to become a viable option to increase occupancy rates and revenues. Services such as laundromat or dog walking can be offered via a third party vendor based on a profit sharing model.

To keep up with the Joneses multifamily housing owners and developers are offering a slew of amenities like never before:

• Bike storage and repair

• Car-sharing service

• Child-care service

• Concierge

• Cooking classes

• Dry cleaning/laundry service

• Free WiFi

• iCafe

• Package delivery management

• Personal shopper

• Pet grooming

• Rock-climbing wall

• Rooftop terrace

• Spa/massage center

• Tech/business center

• Wine cellar

• Yoga/Aerobics/Wellness classes

Be prepared for a market slowdown

The multifamily housing market has been performing quite well over the last few years and 2017 didn’t disappoint, registering 6.1% growth in Q4 of 2017. However, as the saying goes “what goes up must eventually come down” and 2018 may start seeing the beginning of this plateauing. The reasons for the slow down vary from high completion counts to increasing rental prices. This doesn’t mean that property developers and owners won’t have a good year it’s just that the signs are pointing to a possible downturn so it’s always good to be prepared. The persistent scarcity of housing has led to surges in rental rates. Nevertheless, market analysts predict that these dramatic price rises will likely slow in the coming years as housing becomes more available.

However, don’t start panicking just yet. According to CBRE U. S. “Developers are poised to register the second-highest annual completions count of this cycle in 2018, down by 9.2% from 2017’s cycle peak. Because apartment starts began to slow in 2017, the multifamily market will get a reprieve from new supply by late 2018 and throughout 2019.” As an investor it may pay to hold off on investing in the multifamily market until the end of the 2018.

Jump on the social media bandwagon

According to Statista in 2017, 81% of Americans had a social media profile and they're utilizing it for everything from doing their daily shopping to researching the new IPhone. What they’re also using it for is to find information about properties they’re interested in renting. Potential renters want to get an idea about the property even before they see it in person. By seeing pictures, reading comments and seeing how others interact they get a “feel and vibe” of a place and can make a better informed decision. Having a presence on social media platforms like Facebook and Instagram also provides property managers a platform to engage with current and potential residents and is particularly effective for connecting with younger Millennial and Gen Z renters who are influenced by peer-based marketing.

Class B properties on the rise

As an investment option Class B multifamily properties are going to be quite attractive in 2018. Granted that Class B property values and rent will be lower in comparison to their Class A competitors; nevertheless, Class B buildings are usually at least in good, if not great condition and may command above average rents. These properties also pose an ideal opportunity for owners and developers who are willing to invest in improving these buildings. Many Class B or even Class C properties just need some TLC and upgrades to command greater rent and attract a higher quality tenant.

Many metro cities have been experiencing an exodus of tenants due to dense population and lack of affordable housing. Suburbs are now becoming an attractive option and offer prime prospects for investors looking beyond the cities and searching for Class B properties in the outer belt of cities. These suburban properties also tend to have a lower turnover as renters and buyers tend to be young growing families who want stability for themselves and their children. Many suburban properties tend to be pretty quiet compared to the city while also sporting big backyards and outdoor communal spaces which make them easier to rent out.

Of course there are many more trends that should be taken into account when investing in multifamily housing however, the 2018 trends mentioned above will provide a guideline for what to be aware of.